The difference between critical illness and life insurance

What is critical illness cover? 

Critical illness cover is a type of insurance that will pay a one off payment to help you protect your home, family and lifestyle, giving you peace of mind that your dependants won’t struggle if you should happen to be suffering from a serious illness that stops you from working.

It differs from life insurance in that it can pay out while you are still alive. 

This one-off payment can be used to cover various expenses. It could cover your mortgage or medical fees if you were left unable to work, for example. Critical illness cover insures you against many life-changing conditions. Depending on your policy, these can include, among others: 

• Cancer
• Heart disease
• Strokes
• Alzheimer's disease
• Kidney failure

A payout is most commonly made when a patient has been diagnosed with a qualifying condition, unlike life insurance, which is paid out after the policyholder has passed away. 

What’s the difference between critical illness cover and life insurance? 

The key difference between life insurance and critical illness cover is the circumstances in which a policy is paid out. Life insurance policies make a one-off payment to your loved ones after you pass away. With critical illness insurance, the payment is made to you while you’re still alive, but have been diagnosed with a serious medical condition that meets your insurer’s defined definition. 

Critical illness cover can:

• Pay out while you're still alive following a serious medical diagnosis.
• Cover a wide variety of illnesses and disabilities, from cancer to multiple sclerosis and loss of speech. But exclusions apply to each policy, so always check the conditions you are covered for in your policy documents.
• Make up for a sudden drop in your income, ensuring bills can still be paid if you need to leave work.
• Support people with or without dependants, as you'll still be around to benefit from the lump sum.
• Be used to cover multiple costs, including everything from household expenses to necessary property adjustments caused by an illness, such as the need to install wheelchair access.

Life insurance can:

• Provide a one-off payment to your family if you pass away within the policy term. This is different to standalone critical illness cover, which pays out during your lifetime.
• Be subject to certain restrictions. For example, a claim may be turned down if you pass away following direct involvement in criminality or failed to reveal an existing medical condition.
• Come in different forms. You can choose level cover, where the premiums and amount covered are fixed. Another option is decreasing cover, where although your premiums are fixed, the potential lump sum reduces over the policy term, often in line with your circumstances.